Walmart’s Q4 Earnings, Revs In Line

Walmart’s Q4 Earnings, Revs In Line

Walmarts fiscal fourth quarter 2014 adjusted earnings of $1.60 per share were in-line with the Zacks Consensus Estimate, but declined 4.2% year over year from the year-ago earnings of $1.67 per share. Lower sales due to a challenging retail environment led to the year-over-year decline in earnings.

Total revenue of the retailer climbed 1.5% to $129.7 billion (including membership and other income) and was in-line with the Zacks Consensus Estimate. Currency fluctuations reduced sales by $1.8 billion in the quarter. A challenging retail environment in the U.S. as well as in most international markets due to cautious consumer spending also hurt the top line in the quarter.

Total revenue comprised net sales of 128.8 billion (up 1.4% year over year or 2.8% on a constant currency basis) and membership and other income of $0.92 billion (up 12.7% on a year-over-year).

On a constant currency basis, operating income increased 0.2% to $27.8 billion, driven by productivity improvements.

Segment Details

Walmart U.S.: The segment posted net sales growth of 2.4% to $76.4 billion in the quarter, including the impact of fuel sales. Operating income increased 0.1% to $6.38 billion.

U.S. same-store sales (comps) for the 14-week period ending Jan 31, 2014 declined 0.4% versus 0.3% growth in the prior-year quarter. Weak consumer spending environment hurt comps in the quarter. Comp traffic declined while average ticket increased in the quarter. E-commerce sales positively impacted comp sales in the quarter.

Walmart International: Segment net sales, including fuel sales, declined 0.4% (increased 4.6% on a constant currency basis) to $37.7 billion compared to prior-quarter’s sales growth of 0.2%, due to sluggish consumer spending environment in both mature and emerging markets. Currency fluctuations also negatively impacted sales.

Operating income declined 45.8% to $1.31 billion due to higher expenses.

Sams Club: The segment, which comprises membership warehouse clubs, posted net sales growth, including fuel impact, of 1.3% to $14.7 billion. Sams Club operating income declined 15.3% to $0.43 billion in the quarter.

Sams Club’s comps, excluding the impact of fuel sales, declined 0.1% in the quarter due to decline in average ticket, which offset the impact of higher traffic and e-commerce sales. The segment had recorded growth of 1.1% in the prior year quarter.

Other Financial Update

During the quarter, Walmart increased its annual dividend by 2% for fiscal 2015, thus marking the 41st consecutive year of increase. The company will now pay an annual dividend of $1.92 per share in four quarterly installments of 48 cents, with the first payment to be made on Apr 1 to shareholders of record as of Mar 11. However, the dividend hike of 2% was much lower than last year’s dividend hike of 18%.

Fiscal 2014 Results

Walmart reported fiscal 2014 adjusted earnings of $5.11 per share, which was behind the Zacks Consensus Estimate of $5.13 per share by 0.4%. Earnings increased 2% from the prior year earnings of $5.01 per share.

Total revenue grew 1.6% to $476.3 billion (including membership and other income). However, it lagged the Zacks Consensus Estimate of $478.1 billion due to a challenging retail environment.

First Quarter and Fiscal 2015 Outlook

For fiscal 2015, Walmart expects adjusted earnings to be in the range of $5.10 – $5.45, compared with adjusted earnings of $5.11 per share in fiscal 2014. The company expects macro-economic headwinds like reductions in government benefits, higher taxes, tighter credit and higher group health care costs to impact the results.

In October, the company forecast a 3%-5% net sales increase for fiscal 2015. Given these factors and the ongoing headwind from currency exchange, Walmart expects it to be toward the low end of the guidance.

For the first quarter of fiscal 2015, Walmart expects its adjusted earnings to range between $1.10 and $1.20 per share. Walmart expects U.S. comp sales to be relatively flat for the 13-week period ending May 2, as against a decline of 1.4% last year. Sam’s Club comp sales, without the impact of fuel sales, are expected to remain flat compared to a 0.2% increase last year.

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